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Financial Services Law Insights and Observations


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  • CFPB holds its Consumer Advisory Board Meeting

    Federal Issues

    On May 15, the CFPB held its Spring 2024 Consumer Advisory Board Meeting (CAB) to discuss mortgage servicing and origination, consumer data reporting accuracy, and medical debt on credit reports. The CAB met with the CFPB leadership to discuss broad policy matters related to the CFPB’s Unified Regulatory Agenda and scope of authority. The discussions on mortgage servicing and origination covered capping closing costs to make homeownership more accessible. Additional concerns related to the impact of private equity on the housing market and how it changes home affordability in certain neighborhoods. Additionally, CAB members raised yet another implication which would make home ownership difficult in the refinancing space for small-balance mortgages. Predatory practices involving solar lending were of concern due to the influx of funds related to the Inflation Reduction Act. CAB members shared the challenges faced by mortgage servicing and foreclosure prevention services leading to delays in loss mitigation processing and high-touch mortgage servicing areas. Additional talking points included topics such as tenant screening and employment background checks, purpose limitations under the FCRA, creation of a “Public Credit Registry,” reduced time limits on negative information reporting, and restricted use of credit scores in employment and rental decisions.

    Federal Issues CFPB Advisory Board

  • OIG makes recommendations for CFPB’s examiner commissioning program

    Federal Issues

    On May 15, the Office of Inspector General (OIG) for the Fed and CFPB published a report entitled “The CFPB Can Enhance Certain Aspects of Its Examiner Commissioning Program.” The report assessed the CFPB’s examiner commissioning program (ECP) and included recommendations to enhance the program. The OIG made three high-level recommendations in the report:

    1. Create clear guidelines delineating the duties and expectations for those servicing in ECP support roles, including (i) mentorship during acting EIC assignments, (ii) provide regional training leads support during rotations, and (iii) field manager assistance in selecting suitable examinations and identifying acting examiner in charge (EIC) tasks for commissioning candidates.
    2. Establish a uniform method for supervision learning and development and regional offices to jointly offer additional support to examiners during their ECP preparation.
    3. Review and improve the feedback parameters for the EIC case study assessment, ensuring examiners receive detailed, constructive feedback while maintaining the integrity of the EIC case study assessment. Update the feedback guidelines accordingly and provide training on these new standards.

    Federal Issues OIG CFPB

  • Chopra remarks on how less credit reporting competition may lead to higher mortgage costs

    Federal Issues

    On May 20, CFPB Director, Rohit Chopra, delivered a speech at a trade association event addressing the rising costs in the mortgage lending industry, which may be due to limited competition in the credit reporting sector. According to Chopra, the mortgage industry was dominated by three major conglomerates, and credit scores were provided by a single corporation. These entities have significantly increased the price for credit reports and credit scores in recent years, with increases reaching as high as 400 percent since 2022. These price hikes can increase a lender’s origination fees or interest rates and have impacted both lenders, especially small lenders, and homebuyers disproportionately.

    Chopra added how lenders require credit reports and credit scores for loan origination and adhere to secondary market requirements, which would necessitate purchasing these reports multiple times, like for joint applications. Director Chopra also noted that price increases were no longer tied to volume discounts and instead were now based on a flat fee pricing model, exacerbating costs for lenders. Additionally, the CFPB questioned the accuracy of credit reports, with the reporting industry profiting from expedited correction services known as a “rapid rescore.”

    Director Chopra emphasized the need for regulatory intervention to address these issues within the mortgage industry. Chopra stated that “limiting chokepoints” was critical. As a result, the CFPB was examining these rising costs and considering regulatory measures to enhance competition and affordability. The Bureau was also promoting “open banking,” which would allow consumers to share their financial data directly with lenders to potentially reduce reliance on traditional credit reports and credit scores.

    Federal Issues Agency Rule-Making & Guidance CFPB Mortgages Consumer Finance Credit Reporting Competition

  • Congressional Democrats pen letter to financial regulators on “de-risking” and inclusion

    Federal Issues

    On May 15, 11 Congressional Democrats sent a letter to Treasury Secretary Yellen, now-former FDIC Chairman Gruenberg, Acting Comptroller Hsu, Fed Chair Powell, FinCEN Director Gacki, NCUA Chair Harper, and CFPB Director Chopra asking for robust, modernized anti-money laundering (AML) and financial crimes compliance to support equitable banking access for Muslim Americans and immigrant communities. The congressmembers raised these concerns as banks increasingly engaged in the practice of “de-risking,” which involved indiscriminately terminating or restricting business relationships with broad categories of customers rather than managing risk consistent with risk-based supervisory or regulatory requirements. The letter highlighted that customers in the Muslim American, Middle Eastern, and South Asian American communities “may” be considered “high-risk” erroneously for sending payments or remittances abroad, or by donating to charities or religious institutions. The letter asserts that this practice can also harm economic stability and sustainability in countries that depend on remittances for development.

    The Democrats proposed several changes to address these concerns. First, the letter asked financial regulators to issue a joint statement affirming financial inclusion as a priority. Second, it requested a formal advisory group on financial inclusion. Third, the letter requested FinCEN issue FAQs to help financial institutions “avoid shutting down or restricting accounts unnecessarily.” Fourth, the letter asked the Treasury to amend its annual examiner training to include a discussion on financial inclusion. Fifth, it asked for the promulgation of guidance for banks to provide pre-clearance mechanisms for consumers likely to raise AML flags. Finally, the letter requested that the CFPB establish notice and dispute resolution requirements for consumers who “experience account closures especially when a SAR is not filed.”

    Federal Issues Congress CFPB OCC

  • CFPB orders debt relief servicer to pay $400,000 for charging advanced fees

    Federal Issues

    On May 20, the CFPB released its consent order and stipulation against a debt relief provider for alleged deceptive acts and practices in violation of the CFPA and for alleged deceptive telemarketing practices and collection of advance fees in violation of the Telemarketing Sales Rule (TSR). The CFPB alleged the violations began in January 2016 and ordered a civil money penalty of $400,000. Specifically, the CFPB found the company harmed 5,970 consumers with student loans in the amount of a total of $974,590 in at least three ways: (1) by charging advance fees of $99 to $199 for debt relief services in violation of the TSR, regardless of success in loan relief; (2) by misrepresenting that the fees would be applied to student loans when they were not often used to pay off the student loans; and (3) by misleading consumers that would consolidate student loans, lower monthly payments, and achieve loan forgiveness – especially when the company did not fulfill any of these claims in many instances.

    The Bureau nullified all agreements relating to the company’s debt relief services between a consumer and the debt relief company. The Bureau also ordered the company to cease fee collections or attempts and permanently restrained the company from advertising or marketing its debt relief services or receiving any consideration from holding an ownership interest in, providing services to, or working in any capacity for any person engaged in or assisting others in the advertising, marketing, promoting, offering for sale, or selling debt relief services. If the company failed to disclose any material asset or if any sworn statements contain any material representation or omission, the Bureau will require an additional $5 million fine. The company neither admitted nor denied these findings.

    Federal Issues CFPB CFPA Telemarketing Sales Rule Student Loans

  • CFPB issues interpretive rule likening BNPL accounts to credit cards under Regulation Z

    Agency Rule-Making & Guidance

    On May 22, the CFPB issued an interpretive rule stating its position that certain consumer protection provisions of Regulation Z applied to Buy Now, Pay Later (BNPL) accounts. The interpretive rule asserted that “digital user accounts” used to access BNPL credit are considered “credit cards” under Regulation Z.

    According to the CFPB, BNPL “digital user accounts” fell within TILA and Regulation Z’s definition of a credit card because they qualified as an “other credit device” or “other single credit device.” The CFPB likened its interpretation of “credit device” to the Fed’s interpretation of “access device” in Regulation E, which included non-physical payment codes to initiate an electronic fund transfer. Further, the CFPB stated that because BNPL “digital user accounts” were usable “from time to time to obtain credit,” they met the definition of a “credit card” under Regulation Z.

    As a result, the CFPB’s interpretive rule stated that entities issuing such accounts were “card issuers” and therefore “creditors” who are “broadly subject” to the regulations in Subpart B of Regulation Z. The interpretive rule noted that although Subpart B was entitled “Open-End Credit,” it nevertheless applied to closed-end BNPL credit issued through a digital user account if such credit was not subject to a finance charge and was not payable by written agreement in more than four installments. Subpart B included provisions applicable to, among other things, disclosures, consumer disputes, billing errors, and refunds.

    The CFPB will request public feedback on the interpretive rule but will reserve the right to move forward without revisions if they are not warranted. The CFPB will submit a report with the interpretive rule to the Senate, the U.S. House, and the U.S. Comptroller General (head of the GAO) prior to the rule’s published effective date.

    Agency Rule-Making & Guidance Federal Issues CFPB Buy Now Pay Later Regulation Z TILA Credit Cards

  • CFPB sues online lending platform for alleged CFPA, FCRA violations

    Federal Issues

    On May 17, the CFPB announced a lawsuit against an online lending platform through which consumers could obtain small-dollar, short-term loans through a brokering arrangement with lenders. The CFPB alleged the platform violated the CFPA through its deceptive advertisements to consumers on the platform’s alleged promotion of financing terms which included “no interest,” “0% APR,” or “0% interest” but instead invited consumers to provide “tips” and “donations” to lenders, which, would increase the likelihood of a loan being funded. The CFPB further alleged that while the platform marketed zero-interest loans, the platform did not provide users an option for a $0 donation fee or to skip the fee altogether. The Bureau claimed, “almost all of [the platform’s] loans carry an equivalent annual percentage rate of over 36% APR, and many loans carry an APR in excess of 300%, with some over 1,000%.” The Bureau also claimed the platform violated the CFPA by providing misleading TILA disclosures that did not contain the cost of the additional fees and tips in the quoted total payments.

    The complaint alleged further violations of the CFPA where the platform (i) obscured whether and how borrowers can select the option for no donation or tip; (ii) stated or implied through its practices that consumers were obligated to repay loan amounts although the loans violated the applicable states’ lender-licensing or usury laws that declared such loans void ab initio or limited consumers’ obligation to repay; (iii) requested to collect and collects on void loans consumers were not obligated to repay for the aforementioned reason; (iv) misleadingly implied that it will furnish negative information to the credit bureaus unless the consumer makes a payment, without actually intending to do so; and (v) violated the FCRA.

    The CFPB’s complaint stated that because the platform was a consumer reporting agency under the FCRA and therefore would be required to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The CFPB will seek, among other things, injunctions against the platform to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.

    Federal Issues Peer-to-Peer Enforcement CFPB Consumer Finance CFPA FCRA

  • U.S. Supreme Court rules CFPB funding structure is constitutional


    On May 16, the U.S. Supreme Court ruled 7-2 that the funding structure of the CFPB was consistent with the Constitution’s appropriations clause, reversing a decision of the U.S. Court of Appeals for the Fifth Circuit that had called the Bureau’s ability to continue operating without Congressional action into question. The Supreme Court recognized that the CFPB’s funding structure was unique: Congress authorized the Bureau to draw from the Federal Reserve System instead of appropriating funds through the annual appropriations process. However, the Supreme Court found that this unique feature did have constitutional significance. The only question presented was whether the Bureau’s funding mechanism was an “Appropriatio[n] made by Law.” The Supreme Court found that the answer was yes.

    Specifically, the Supreme Court held that Congress’s statutory authorization to allow the Federal Reserve System to fund the CFPB satisfied the appropriations clause since “appropriations need only identify a source of public funds and authorize the expenditure of those funds for designated purposes to satisfy the Appropriations Clause,” and both criteria were met. The Supreme Court found the trade associations’ arguments as to why the Bureau’s funding mechanism violated the appropriations clause were unpersuasive.

    The CFPB’s constitutionality was challenged following the Bureau’s promulgation of a 2017 regulation on payday lending. In response to a challenge to that regulation, the District Court for the Western District of Texas granted summary judgment to the CFPB; however, the U.S. Court of Appeals for the Fifth Circuit agreed with the trade associations’ arguments and reversed the lower court’s decision, holding that the CFPB’s funding mechanism violated the appropriations clause. The Supreme Court has now reversed this decision and remanded the case back to the court of appeals.

    Courts CFPB U.S. Supreme Court Appellate Funding Structure Constitution

  • CFPB’s credit card late fee rule stayed


    On May 10, the U.S. District Court for the Northern District of Texas entered an opinion and order granting the plaintiffs, comprising several trade organization, its motion for preliminary injunction and placed a stay on the CFPB’s credit card late fee rule. As previously covered by InfoBytes, a suit was filed against the CFPB by multiple trade organizations to challenge the Bureau’s final rule to amend Regulation Z and limit most credit card late fees to $8.

    The court decided not to address the plaintiffs’ arguments regarding the CARD Act, TILA, and APA violations due to the Court of Appeals for the Fifth Circuit opinion that the CFPB's funding structure was unconstitutional; therefore, any regulations promulgated by the CFPB would be unconstitutional. For that reason, due to the CFPB’s unconstitutional structure found by the 5th Circuit, the District Court decided that all factors weighed in favor of issuing a preliminary injunction and thus staying the final rule. 

    Courts Federal Issues CFPB Litigation Credit Cards Agency Rule-Making & Guidance Fees Consumer Finance

  • CFPB to extend 1071 rule compliance deadlines

    Federal Issues

    On May 17, the CFPB announced it is extending the compliance deadlines for the small business lending rule (Section 1071 of Dodd-Frank, the “1071 rule”), which will require financial institutions to collect and report data on lending to small businesses to the Bureau (covered by InfoBytes here). Following challenges to the 1071 rule in the U.S. District Court in Texas, the rule was stayed pending the Supreme Court’s decision in CFPB v. CFSA (covered by InfoBytes here). Considering the Supreme Court’s recent decision that the Bureau’s funding is constitutional and the district court’s order requiring the CFPB to extend the rule’s compliance deadlines to compensate for the period stayed, the Bureau will issue an interim final rule to extend compliance deadlines as follows:

    • Tier 1 institutions (highest volume lenders): The new compliance date is July 18, 2025, and the first filing deadline is June 1, 2026.
    • Tier 2 institutions (moderate volume lenders): The new compliance date is January 16, 2026, and the first filing deadline is June 1, 2027.
    • Tier 3 institutions (lowest volume lenders): The new compliance date is October 18, 2026, and the first filing deadline is June 1, 2027.

    Federal Issues Agency Rule-Making & Guidance CFPB Small Business Lending Texas


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